Regional Trade Agreements and Labour Provisions

International Baccalaureate, Geneva, Switzerland


7.1 Labour Provisions in Regional Trade Agreements

With the increasing failure to include labour standards in the WTO, the second best option in the opinion of the proponents has been to include labour standards in regional and bilateral trade agreements. In this chapter, we would examine labour standard clauses in some regional trade agreements,1 specifically trade agreements signed by the United States, the European Union, and Canada with other countries. This chapter will also highlight other relevant free trade agreements with social clauses.

We would like to, as mentioned earlier, reiterate here that the analyses will mainly focus on the North America Free Trade Agreement (NAFTA) side agreement: the North America Agreement on Labor Cooperation (NAALC). The objective for focusing on the NAALC is that it is about the only FTA that has adjudicated labour disputes. The emphasis on the NAALC does not in any way indicate that the FTAs signed by the European Union (EU), Canada, and other countries are not relevant to the discussion of the linkage between the CLS and international trade in FTAs, but rather all the agreements fit into the overall debate in finding a common ground for the resolution of this contentious issue.

From the time of GATT until the 1990s, there was no trade agreement with a labour provision. However, by 2011, trade agreements with labour provisions had risen to 47. Of these trade agreements, about two-thirds contain labour provisions with reference to four categories of CLS. According to research carried out by the ILO, whereas only four per cent of all trade agreements that came into force between 1995 and 1999 included labour provisions, the figure rose to about one-third of all trade agreements signed between 2005 and 2011.2

As at 2011, approximately 120 countries were covered by at least one trade agreement and about 50 countries were covered by two trade agreements. Out of these countries, about 20 have signed trade agreements with labour provisions that include trade measures. Some of these labour provisions are either included in the body of the trade agreement or contained in a side agreement.

7.2 United States of America RTAs with Labour Provisions

Since it signed its first free trade agreement with Israel in 1985, the United States has negotiated FTAs with 20 countries such as Canada, the North American Free Trade Agreement (NAFTA, with Canada and Mexico), Jordan, Chile, Singapore, Australia, Morocco, Bahrain, and Oman; the CAFTA-DR regional trade agreement with the Dominican Republic and the five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua), Peru, Colombia, Panama, and South Korea.

According to Bolle, the agreements with the last six Central American countries is a reflection of bipartisan agreement on the language on labour standards as indicated in the New Trade Policy With America, which was agreed between the former president G.W. Bush administration and Congress on 10 May 2007. This policy is important in United States labour relations with its trading partners as it advocates two key labour provisions: first, the need for a fully enforceable commitment that countries signing FTAs with the United States will adopt, maintain, and enforce in their national laws and practice, the basic international labour standards as stated in the 1998 ILO Declaration. Second is the commitment to use identical enforcement provisions for labour and commercial disputes.3

With respect to free trade agreements entered into by the United States, we would examine the North American Free Trade Agreement (NAFTA) and the US–Jordan, Singapore, Chile, and Peru Free Trade Agreements.

Bolle has categorised the labour and enforcement provisions in the various agreements into four models. These four models are highlighted below:

  • Model 1—the parties under NAALC agree to enforce their own labour laws and standards. The only enforceable provision with sanctions under the Agreement is found in Article 29(1), which states that “… persistent pattern of failure … to effectively enforce its occupational safety and health, child labor or minimum wage technical standards”. This must be trade related and also covered by mutually recognised labour laws. Comparing the main agreement with the side agreement, the side agreement has different enforcement procedures from the main agreement. Furthermore, there are limits placed on monetary enforcement assessments, with the suspension of benefits for non-compliance. The main agreement has no monetary assessments.

  • Model 2—the U.S.–Jordan FTA, unlike NAALC, incorporated a number of labour provisions in the main agreement, which include Parties agreeing “not to fail to effectively enforce its labour laws … in a manner affecting trade”.4 Under this Agreement, the commercial and labour provisions share the same dispute settlement procedures. This makes the labour and commercial provisions equally enforceable.

  • Model 3—the seven trade agreements with 12 different countries, that is, Chile, Singapore, Australia, Morocco, Bahrain, Oman, and the CAFTA-DR countries (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic) contain only one enforceable labour provision, which states that each party “shall not fail to effectively enforce its labour laws … in a manner affecting trade between the Parties”. Labour laws in all the agreements are defined as “a Party’s statutes or regulations … that are directly related to” the United States list of worker rights that are internationally recognised. All seven agreements share many of the same procedures for labour and commercial disputes. Whereas limit on monetary penalties are placed on labour disputes, there are no limits placed on commercial disputes. For both types of disputes, suspension of benefits is used only as a last recourse.

  • Model 4—the new Trade Policy for America included four enforceable labour concepts as template language to be included in pending FTAs and future FTAs in identical form. The concepts are (1) a fully enforceable commitment that Parties to free trade agreements would adopt and maintain in their laws and practices as stated in the ILO Declaration, (2) a fully enforceable commitment prohibiting FTA countries from lowering their labour standards, (3) new limitations on “prosecutorial” and “enforcement” discretion (i.e., countries cannot defend failure to enforce laws related to the five basic core labour standards on the basis of resource limitations or decisions to prioritise other enforcement issues), and (4) the same dispute settlement mechanisms or penalties available for other FTA obligations (such as commercial interests).5

The Agreements under this Model have the same dispute settlement provisions for both labour and commercial disputes. The labour provisions are fully enforceable. The template language also includes a footnote that states: “The obligations set out in Article 17.2, as they relate to the ILO, refer only to the ILO Declaration.” Whilst the agreement of May 10, 2007, is silent on this issue, it appears to suggest that Parties would be held only to the principles of the ILO Declaration but not to the conventions of the ILO. It is important to note that the New Trade Policy with America only deals with goods for export (Table 7.1).

Table 7.1
United States FTAs with labour rights and social provisions


Date entered into force on

Labour rights and social provisions in Agreement



1 January 2009

• Labour rights and labour issues are included in chapter 16

• Labour rights and labour issues are also developed in Annex 16-A (Labour Cooperation Mechanism)



1 February 2009

• Labour rights and labour issues are included in chapter 17


US/South Korea FTA

15 March 2012

• Labour rights and labour issues are included in chapter 19

• Labour rights and labour issues are also developed in Annex 19-A entitled “Labour Cooperation Mechanism”, and the protection of labour rights is confirmed in a public letter


US/Panama FTA or TPA (trade promotion agreement)

7 July 2007

• Labour rights and labour issues are included in chapter 16


US/Morocco FTA

1 January 2006

• Labour rights and labour issues are included in chapter 16


US/Bahrain FTA

August 2006

• Labour rights are included in chapter 15

• Labour Cooperation Mechanism in Annex 15-A


US/Colombia FTA

15 May 2012

• Labour rights and labour issues are included in chapter 17


US/Australia FTA

1 January 2005

• Labour rights are included in chapter 18, page 236 of the final text


CAFTA-DR (Central American and Dominican Republic FTA)

5 August 2005

• Labour rights are included in chapter 16


US/Chile FTA

1 January 2004

• Labour rights and labour issues are included in chapter 18


US/Singapore FTA

1 January 2004

• Labour rights and labour issues are included in chapter 17 and in Annex 17-A, pages 207 to 211


US/Jordan FTA

17 December 2001

• Labour rights and labour issues are included in chapter 6


North American Free Trade Agreement (NAFTA)

1 January 1994

This contains the North American Agreement on Labor Cooperation (NAALC) text


7.3 United States of America’s Motives for Promoting FTAs

The reasons for the United States entering into the free trade agreements are threefold: economic, political, and social. First, the economic reasons were to expand sales opportunities for U.S. companies exporting to Mexico, enhance North American international competitiveness by permitting companies to set up operations where it would be most profitable economically, without distortions caused by trade or investment barriers. In addition, “level the playing field” by protecting U.S. jobs and wages from what some consider unfair competition from low-wage foreign producers.

Second is the political reasoning for doing so. The U.S. appears to be leaning more towards countries that have moved toward market economies and democracy, which then makes them both political and commercial allies of the United States.6 The U.S. also sees the FTAs as a means to increase transparency in corporate governance, legal systems, and due process in the partner countries and a means to strengthen the local economies.7

Third, in addition to the economic and political reasons are the social considerations. The labour provisions in recent agreements are indications of the U.S. commitment to uphold the rights of workers. The FTAs are built on the U.S. traditional support for and promotion of labour standard conventions adopted by the ILO. The U.S. Congress has grappled with the issues raised by arguments for and against the linkage between trade and labour standards. Two issues tend to have emerged: (1) whether these agreements balance the promotion of worker rights with trade and investment opportunities for businesses and (2) if the labour provisions in the agreements are the proper models for future trade agreements.8 As discussed below, the U.S.–Jordan Agreement was the first to incorporate labour provisions in the body of an FTA. This provision has raised debate in the U.S. Congress as to whether worker rights provisions should, in the future, be included in free trade agreements or that the U.S.–Jordan model should be a one-time occurrence.

Whereas the NAFTA agreement had labour provisions in a side agreement, the U.S. agreements with Jordan, Chile, and Singapore have labour provisions incorporated in the body of the agreements.9 Table 7.3 shows a comparison of the four agreements. We intend in this section to examine only the labour provisions under NAFTA and the U.S.–Jordan, U.S.–Singapore, U.S.–Chile, and U.S.–Peru Free Trade Agreements. A comparison of the labour provisions in both NAFTA and U.S.–Chile agreements are made in Table 7.3. The reason for this comparison is to show how the provisions in model 1 evolved to the provisions in model 2 as an indication of the evolution of labour provisions from the start. Also in Table 7.3, we undertake a comparison of the key provisions under the four models and the agreements that fall under each to provide a full picture of the evolution of labour provision process.

7.4 Review of United States of America Free Trade Agreements and Labour Rights

The section below reviews one free trade agreement each from models 1–3 and two agreements from model four.

7.4.1 North American Free Trade Agreement (NAFTA)

On 1 January, 1994, the agreement signed between the United States, Canada, and Mexico, known as the North America Free Trade Agreement (NAFTA), entered into effect. NAFTA is the largest and most comprehensive trade agreement signed to date. NAFTA is the first agreement to include labour provisions in a trade agreement. Originally, labour issues were not to be part of the agreement. The main agreement only mentions labour issues in the preamble. In the text are listed reasons for signing the agreement such as job creation, improved working conditions, and the protection and enforcement of basic workers’ rights. With regard to labour issues, this was as far as the agreement went. NAFTA was not intended to address labour issues within the body of the agreement.10

However, during the NAFTA debates in the U.S. Congress, organised labour intensified its efforts since it was believed at that time that a considerable number of jobs in the U.S. would be lost to a low-wage country like Mexico. The critics of the agreement alleged that an estimated 500,000 U.S. jobs and even more would be lost to Mexico.11 In an attempt to allay the fears of organised labour, President Clinton agreed to negotiate a supplemental agreement to NAFTA, which became known as the North American Agreement on Labor Cooperation (NAALC). NAALC: Precedent for Labour Standards in Trade Agreements

The NAALC came into effect on 1 January 1994, the same time as the parent agreement after the leaders of the three countries had agreed to its final form in September 1993.12 The Agreement created a multinational enforcement and review system that allows each country to monitor how the others enforce their national labour laws. NAALC holds the potential in effectively ensuring that the rights of workers are protected in the NAFTA countries, at the same time making possible the expansion of trade among the countries. Murphy (1995) states that the NAALC reaffirms NAFTA’s goals as set forth in the Preamble to the creation of an expanded, secure market for the Parties’ goods whilst enhancing the Parties’ competitiveness in the global market and helping in the creation of new employment opportunities.13

NAALC provides an avenue for employers, employees, unions, and governments to work to promote workers’ rights. The signatories expect to achieve the goals of the Agreement through the publication and dissemination of information concerning job training, union activity, and labour law.

The NAALC, though it is not the first attempt to link the right of workers and trade agreements, broke new ground in the history of trade agreements by creating labour-related obligations and establishing sanctions for failure to fulfil them in certain cases. The agreement represented an attempt to balance the differing interests of foreign and domestic labour forces and governments of all countries. The aim of the NAALC is to promote labour standards by obliging each party to enforce its domestic labour laws and ensure that the labour laws provide for high-quality standards, but the Agreement does not issue mandates. The Agreement is clear on the sovereignty of the three nations and goes further to confirm the primacy of each nation’s domestic labour law. It affirms “full respect for each Party’s constitution” and accepts the “right of each Party to establish its own domestic labor standards”.14

In this respect, NAALC does not require or push for the harmonisation of the three countries’ laws. As it is stated in Annex 1 of the Agreement, NAALC’s goals “are guiding principles that the Parties are committed to promote … but do not establish common minimum standards”.15

The agreement promotes mutual obligation and mutual responsibility. The NAALC established an infrastructure with a governing body and an administration to encourage interaction between the three countries.

The NAALC has 11 labour principles:


freedom of association and protection of the right to organise;



the right to bargain;



the right to strike;



prohibition of forced labour;



labour protection for children and young persons;



minimum employment standards, such as minimum wages and overtime pay, covering wage earners, including those not covered by collective agreements;



elimination of employment discrimination on the basis of such grounds as race, religion, age, sex, or other grounds as determined by each party’s domestic laws;



equal pay for men and women;



prevention of occupational injuries and illnesses;



compensation in cases of occupational injuries and illnesses; and



protection of migrant workers.16


These principles go far beyond the core labour rights embodied in the 1998 ILO Declaration. The NAALC calls on all three governments to improve performance regarding all these rights and standards. There is, however, no enforceable obligation to do so. In fact, the parties to the NAALC are not even explicitly prohibited from weakening their labour law: Article 3 of the NAALC recognises “the right of each Party to establish its own domestic labor standards, and to adopt or modify accordingly its labor laws and regulations”.17

The side agreement not only defines labour laws as laws and regulations that are directly related to the eleven rights; it also demands that these rights provide for “high labor standards” to be harmonised among the three parties and that they should be continually improved over time. The agreement states that a prerequisite determination should be made to effectively enforce a member’s domestic law before a claim can be brought against any of the other parties under the dispute resolution mechanism.18 The agreement allows any person with a recognised interest under the law to submit complaints or petitions to any of the three parties.19 However, only three areas fall under this provision, namely child labour, minimum wage and technical labour standards, and occupational safety and health. The agreement does not allow for complaints to be brought in cases relating to freedom of association, right to bargain collectively, and forced labour.

Enforcement provisions in the agreement involve a three-tiered structure that excludes fines or sanctions outside the realm of child labour, minimum employment standards, and occupational health and safety. In the case of freedom of association and the right to collective bargaining, the agreement only allows for ministerial consultations between the labour ministers.

Box 7.1: The Three-Tier System

  • The first tier is limited to NAO review and ministerial oversight. A committee of experts cannot evaluate the enforcement of labour principles in this tier, and no penalties are provided for non-compliance. The labour principles in this tier are freedom of association, collective bargaining, and the right to strike.

  • In the second tier are principles subject to NAO review, ministerial consultations, and evaluation by a committee of experts. This does not call for arbitration of disputes and does not require the imposition of penalties. Included in this tier are forced labour, gender pay equity, employment discrimination, compensation in case of injury or illness, and protection of migrant labour.

  • The labour principles in the third tier—child labour, minimum wages, and occupational safety—receive the full treatment: NAO review, ministerial consultations, evaluation and arbitration, and eventually monetary penalties (Hufbauer and Schott 2005, p. 123).

The agreement permits the creation of a Commission on Labour Cooperation, which is made up of a ministerial council (the three labour ministers) and a secretariat. The Commission mainly deals with cooperative endeavours and studies, and an institutional structure has been set up to deal with complaints on non-enforcement of each country’s domestic labour laws (“submissions”). The NAOs in each member’s labour department or ministry have the duty to receive and process submissions from civil society with respect to the non-enforcement of labour law in any of the three countries. However, the submissions are not limited in scope, i.e., in matters affecting only trade.

Under the agreement, the NAOs are obliged, if requested, to provide information from any of the other NAOs. Basing their review on the information collected, a NAO can request ministerial consultations. If these consultations do not resolve the issue, no further action can be taken for problems involving freedom of association, the right to bargain collectively, or the right to strike. With respect to the other rights, a three-person evaluation committee of experts (ECE) can be appointed to work out a report for review by the ministerial council, including recommendations to improve compliance.

Finally, a five-member arbitration tribunal can be appointed. In cases of child labour, minimum employment standards, and occupational safety and health, a “persistent pattern of non-enforcement” can ultimately result in monetary assessments (fines)—which will be paid into a fund to improve enforcement of labour law in the offending country or, if those are not paid, trade sanctions. Both fines and trade sanctions are capped at 0.007 % of the volume of trade between the two countries (or US$20 million, whichever is lower). Critics of these cumbersome, quasi-diplomatic enforcement procedures have pointed out that it will take more than 30 months to reach this final stage.

In spite of the fact that the initial focus of the agreement was to ensure that Mexico’s labour laws were in line, the agreement has a noteworthy feature—reciprocity. This has led to complaints filed against U.S. labour practices. On the whole, the process is similar to that of the process at the ILO, where members use diplomatic pressure and moral suasion (Fig. 7.1).


Fig. 7.1
Institutional structure of NAALC. Source: GAO-01-933 North American Free Trade Agreement Obligations of the Three Parties Under NAALC

The parties, in signing the NAALC, are obliged to undertake six obligations under “Part Two” of the side agreement. First, the parties accepted the general commitment in Article 2 in establishing and maintaining high labour standards, which should be consistent with high-quality and productivity workplaces. Further, under this obligation, the parties are to continue to strive in improving those standards in their labour laws and regulations.20 This obligation is significant as it has formed the basis for a number of complaints.

Second, the parties are to “promote compliance with, and effectively enforce its labour law through appropriate government action”. This entails seven points listed under Article 3. These are appointing and training inspectors; monitoring compliance and investigating suspected violations, including through on-site inspections; seeking assurances of voluntary compliance; requiring record keeping and reporting; encouraging the establishment of worker-management committees to address labour regulation of the workplace; providing or encouraging mediation, conciliation, and arbitration services; or initiating, in a timely manner, proceedings to seek appropriate sanctions or remedies for violations of its labour law.21

The third obligation concerns private action ensuring that private parties have access to procedures for the enforcement of domestic labour law and collective agreements. The fourth obligation deals with the enforcement of labour laws that are fair, equitable, and transparent. In achieving this, each party has to guarantee procedural due process. Parties are to guarantee open hearings, the right to present information and evidence, and the right to written decision based on the evidence in respect of which the parties were given the opportunity to be heard. The Agreement provides for impartial and independent tribunals and courts and appropriate remedies for the enforcement of labour rights, including compliance agreements, fines, penalties, imprisonment, injunctions, or emergency workplace closures.22

The fifth obligation is a requirement on transparency. Each party is required to publish or otherwise make available to interested parties its laws, regulations, procedures, and administrative rulings of general application.23 The final obligation is that each party is to promote public awareness of its domestic labour law. This should include making public information available on enforcement and compliance procedures and promoting public education regarding labour laws.24

7.4.2 Labour Provisions in the United States–Jordan FTA (U.S.–Jordan FTA)

The U.S.–Jordan FTA went into effect on 17 December 2001. This agreement for the first time broke new ground by the inclusion of multiple workers’ rights provisions in the body of the free trade agreement rather than in a side agreement, as it was the case under NAFTA.25 The agreement covers a number of areas such as services, protection of intellectual property rights, and dispute settlement.

The US–Jordan FTA was signed on 24 October 2000 by the Clinton administration but entered into force on 17 December 2001. The agreement was the third free trade agreement signed by the U.S. The agreement covers substantive issues such as trade in services, electronic commerce, intellectual property rights, balance of payments, rules of origin, environmental provisions, and a transparent dispute settlement process.

However, it is in the area of labour standard provisions that the agreement has come to be seen as ground breaking. The labour provisions in the agreement do not require either country to adopt any new labour laws. Each country is allowed to retain the right to set and change its own labour standards. The two countries affirmed the significance of not waiving or derogating from their labour laws as a way to encourage trade. Under the agreement, the labour provisions in this agreement were more substantive in nature than the provisions under NAFTA since the negotiators made enforceable labour standards go beyond the core labour standards under ILO jurisdiction.

The agreement specifies two sets of provisions over labour issues: labour provisions (Article 6) and dispute settlement provisions (Article 17). The agreement specifically lists freedom of association, the right to collective bargaining, minimum age, prohibition of forced or compulsory labour, minimum age for employment of children, and conditions of work as the relevant key principles.26 The labour provisions in the agreement are an indication of the parties’ commitment to the core labour standards as enunciated by the ILO and internationally recognised worker rights as defined by the U.S. Trade Act of 1974 (as amended). The labour provisions in the agreement are a confirmation that in the pursuit of free trade, the rights of workers can be protected.27 In fact, the preamble to the agreement states that the parties “desire to promote higher labor standards by building their respective international commitments and strengthening their cooperation on labor matters” and also wish to “promote effective enforcement of their respective … labor laws”. Specifically, Article 6.1 of the agreement states:

The parties affirm their obligations as members of the International Labor Organization (“ILO”) and their commitments under the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up. The Parties shall strive to ensure that such labor principles and the internationally recognized labor rights set forth in paragraph 6 are recognized and protected by domestic law.

The agreement provides for resolution of disputes that may arise as a result of (a) interpretation of the agreement, (b) alleged failure of a Party to carry out its obligations under the agreement, and (c) measures taken by a Party that severely distort the balance of trade benefits accorded by the agreement or substantially undermine fundamental objectives of the agreement.

The agreement provides for a period of 270 days or about 9 months in case a Party intends to pursue a dispute. The Party would have to send a request for consultations to a contact point. If the Parties fail to resolve the matter within 60 days of the submission, either party could refer the matter to the Joint Committee to be resolved within 90 days or within a period specified by the Joint Committee. The Panel is requested to present a report containing its findings of fact and its determination, and this is nonbinding. Should the dispute not be resolved within 30 days after the report of the Joint Committee, the affected Party shall be entitled to take “any appropriate and commensurate measure”.

According to Elliot (2003), the U.S.–Jordan model provides a risk because of the unclear language of the dispute settlement provisions. She argues that the labour standard text in the agreement is weak, making it unlikely that any dispute would get as far as allowing a Party to take “any appropriate and commensurate measure”. The only “shall” is found in Article 6(3b), where each party is required to strive to ensure that their laws provide for consistency of their labour standards with internationally recognised labour rights in a way that does not affect trade relations.28

In comparing (see Table 7.2) the U.S.–Jordan Free Trade Agreement with that of the side agreement under NAFTA, it could be argued that the U.S.–Jordan FTA better advances the correlation between the protection of worker rights and trade far beyond that contained in the NAALC. This is achieved in the U.S.–Jordan agreement in two ways: (a) including worker rights provisions in the body of the agreement and (b) allowing either Party the right to take “any appropriate and commensurate measure” if the dispute procedures do not lead to resolution. Bolle (2003b) has stated that the influence of the U.S.–Jordan agreement is seen in the language re-authorising the U.S. Trade and Promotion Authority, and this would go a long way in permitting the inclusion of similar provisions in new trade agreements to include provisions similar to those in the Jordan agreement in the body of the agreement.29

Table 7.2
Comparison of key provisions of U.S.–Jordan FTAs and NAFTA


Jordan Free Trade Agreement, Article 6

NAFTA (P.L. 103–182)

Location of the labour provisions

In the body of the agreement

In the labour side agreement

Definition of worker rights

“Internationally Recognized Worker Rights” from Trade Act of 1974 (P.L. 93-618 as amended by Sec. 503 of P.L. 98-573):

a) right of association;

b) right to organize and bargain collectively;

c) prohibition of forced or compulsory labor;

d) minimum age for employment of children;

e) acceptable conditions re: minimum wages, hours; and occupational safety and health.

“Core Labor Standards” from the International Labor Organization (ILO):

a) freedom of association;

b) right to organize and bargain collectively;

c) prohibition on the use of forced labor;

d) prohibition of exploitative child labor;

e) prohibition of employment discrimination.

“Internationally Recognized Worker Rights” from Trade Act of 1974 (at left), plus the following additions:

f) the right to strike;

g) minimum employment standards relating to overtime pay;

h) elimination of employment discrimination;

i) equal pay for men and women;

j) compensation in cases of occupational injuries and illnesses;

k) protection of migrant workers.

Basic labour requirements

a) All countries must enforce their own labor laws and standards in trade-related situations.

All countries must enforce own labor laws and standards in trade-related situations and shall strive toward the entire list of worker rights.

b) Each Party shall strive to “not waive or otherwise derogate from” its laws as an encouragement for trade.

No comparable provision

Worker rights subject to dispute resolution

All of them

Only three standards out of 11 (for child labor, minimum wages, and occupational safety and health) are enforceable through dispute settlement and ultimately sanctions.

No similar provision

Dispute resolution may be undertaken only for failure to enforce one’s own worker rights laws and regulations, and if alleged failure to enforce is trade related and covered by mutually recognized labor laws.

Enforcement body and dispute resolution procedure

Each country shall designate an office to serve as a contact point on the agreement.

Trade ministers (the Ministerial Council) meet occasionally, supported by a 15-member Secretariat to resolve issues with consultation and persuasion.

Any issue not resolved through consultation within 60 days may be referred to a Joint Committee, and, if still not resolved within 90 days, to a Dispute Settlement Panel chosen by the parties.

In each country a National Administrative Office (NAO) oversees the law; Then an: Evaluation Committee of Experts (ECE) and subsequently an Arbitral Panel (AP) are appointed as needed to debate cases.

Ultimate penalties

If the issue is still not resolved in 30 days, after the panel reports, the affected party may take any appropriate and commensurate measure.

The AP may issue a monetary assessment; and if this is not paid, issue sanctions. Maximum penalties: suspension of NAFTA benefits to the amount of the monetary penalty (which may be no greater than NAFTA benefits from tariff reductions) for 1 year.

Source: Congressional Research Service (2001)

7.4.3 Labour Provisions in the United States–Singapore Free Trade Agreement (U.S.–Singapore FTA)

The United States, after the conclusion of the U.S.–Jordan agreement, stated its intention to negotiate a free trade agreement with Singapore. The U.S.–Singapore FTA went into effect on 1 January 2004. The wide-ranging nature of this agreement is similar in many respects to that of the U.S.–Jordan FTA. The agreement has, in effect, eliminated tariffs on trade in goods between the two countries. The agreement also covers trade in services, market access, investment measures, rules of origin, government procurement, the environment, intellectual property rights, licensing of professionals, capital controls, telecommunications, and dispute settlement.

The labour provisions under the Singapore agreement are, in many respects, similar to the labour provisions in the Jordan agreement. The agreement marked the second time that labour standard provisions was included in the main body of the agreement. Under the agreement, both signatories stated their obligations as Members of the ILO and that they will ensure that their labour laws provide for labour standards that are consistent with internationally recognised labour standards. Just as in the U.S.–Jordan FTA, the U.S.–Singapore agreement contains language that requires the parties to effectively enforce their own domestic labour laws30 and not weaken or reduce domestic labour protection as a means to encourage trade or investment.31 Whereas the reference to investment is absent in the U.S.–Jordan FTA, the U.S.–Singapore FTA makes reference to investment.32 The Singapore agreement includes a reference to the rights recognised as fundamental by the ILO, as well as the so-called internationally recognised labour rights, which are not all recognised as fundamental by the ILO. Just as in the U.S.–Jordan FTA, there is a reference to “acceptable conditions of work with respect to minimum wages, hours of work and occupational safety and health”.33 The U.S.–Singapore FTA, as in the case of the Jordan agreement, does not include the “elimination of discrimination against different categories of workers on the basis of gender, ethnicity, etc.” as a part of the core labour standards, which the ILO Declaration considers as fundamental.

The minimum wage, as used in the U.S.–Singapore FTA, refers in the case of Singapore to the wage guidelines provided by the National Wages Council (NWC) gazetted under the Employment Act.34 With respect to the U.S., statutes and regulations referred to the acts of the U.S. Congress or regulations promulgated pursuant to an act of the U.S. Congress that are enforceable, in the first instance, by action of the federal government.35

Annex 17A of the agreement calls for the establishment of a “Labor Cooperation Mechanism”. This, according to the agreement, is recognition that cooperation is needed to provide enhanced opportunities to improve their labour standards and to further advance the parties’ common commitments. This includes the June 1998 ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up.36 The functions of the Labor Cooperation Mechanism, among others, include establishing priorities for cooperative activities on labour matters, exchanging information with regard to labour law and practice, and finding ways to improve labour law and practice in each signatory country.37 The cooperative mechanism is also tasked with undertaking activities on the fundamental rights and how to effectively apply them, managing labour relations, and providing unemployment assistance programmes and other social safety net programmes.38

Dispute settlement under the U.S.–Singapore FTA is similar to that of the U.S.–Jordan FTA. In both cases, the dispute resolution mechanisms allow for consultations to be followed by a Panel report and attempt by a Joint Committee to help settle the dispute. In spite of this, a complaining party is entitled to take unilateral action. However, in the U.S.–Singapore dispute settlement proceedings after consultations and the issuance of a Panel report, the matter is referred back to a Joint Committee for eventual resolution.39 Should the Joint Committee fail to resolve the matter or should a party fail to execute an agreed upon resolution, instead of the complaining party taking unilateral action, the complaining party could request that the Panel be reconstituted to impose an “annual monetary assessment” at a cap of US$15 million a year.40 This marks a difference from the U.S.–Jordan FTA, which allows the complaining party to take action when it deems it appropriate and commensurate.

7.4.4 Labour Provisions in the United States–Chile Free Trade Agreement (U.S.–Chile FTA)

The U.S.–Chile FTA is the first agreement between the US and a South American country. It is interesting to note that Chile is not a major trading partner of the U.S. but became attractive for an FTA due to its commitment to free trade and its political and economic stability in the South American region. The agreement was signed on 3 September 2003 and followed the precedent already established under the U.S.–Jordan and US–Singapore FTAs—the incorporation of labour provisions in the body of the agreement. In the preamble of the agreement, both parties resolved to increase employment opportunities and strive for the improvement of working conditions and living standards. They also resolved to protect, enhance, and enforce basic workers’ rights.41

Under the agreement, both parties reaffirmed their obligations as ILO members and committed themselves to recognise and legally protect labour principles and rights as defined in the 1998 ILO Declaration on Fundamental Principles and Rights of Work and its Follow-up.42 The labour rights in the U.S.–Chile FTA are the same as those listed in the US–Jordan FTA.43

The agreement commits both signatories to effectively enforce their individual labour laws through a sustained and recurring course of action or inaction, in a manner that affects trade between the two countries.44 The agreement also recognises the right of each party to exercise discretion with respect to issues of compliance and to make decisions on the allocation of resources to enforcement concerning labour matters that are deemed to have higher priorities.45

As it is in the U.S.–Singapore FTA, the U.S.–Chile FTA does not allow the parties to waive or derogate from the internationally accepted labour principles as a way to encourage trade and investment with the other party.46 However, with reference to minimum wages, the U.S.–Chile FTA states that the setting of standards and levels of the minimum wages should not be subjected to obligations under the agreement and that each party’s obligations under the agreement relate to the enforcement of the level of the minimum wage agreed upon by the member.47

The agreement created a “Labor Affairs Council” to oversee the implementation of and review of the agreement, which includes the activities of the “Labor Cooperation Mechanism,48 similar to the U.S.–Singapore FTA. All decisions of the Council are to be taken by mutual agreement of both parties and are to be made public. Any of the parties can request consultations with the other party concerning issues in the labour chapter. The FTA provides a clear schedule for resolution of issues before the matter is referred to other bodies.49

Should the Council fail to reach an agreement on a matter under consultation within 60 days, the complaining party may request consultations with the offices of the Commission of Good Offices, Conciliation and Mediation. If no agreement is reached, then four members on the labour roster are selected to resolve the dispute.50 The U.S.–Chile FTA is different from the U.S.–Jordan FTA in the sense that whereas the U.S.–Jordan FTA permits appropriate and commensurate measures to be taken in case of violation of any of the labour provisions in case a dispute cannot be resolved, the U.S.–Chile FTA does not allow either party to have recourse to the dispute settlement mechanisms on any issue than the enforcement of the party’s domestic labour laws in a matter affecting trade between the parties. The issues to be considered as affecting trade consists of only five out of the eight labour standards stated in the agreement (child labour—two labour standards, forced labour, standards on freedom of association and acceptable conditions of work).

The U.S.–Chile FTA is similar to the U.S.–Singapore on the imposition of a monetary assessment adjusted for inflation at a cap of US$15 million annually. The monetary assessment is to be paid in equal quarter instalments into a fund established by the Commission to be invested in improving labour law enforcement. Should the party complained against fail to meet the payments, then the other party is permitted to take action, which includes the suspension of tariff benefits without affecting the benefits of third parties.51

The FTA also recognises the importance of cooperation in enhancing opportunities to further advance common commitments. Such commitments include the ILO Declaration and compliance with ILO Convention on the elimination of the worst form child labour (Convention No. 182). In order to achieve this, the FTA includes a Labor Cooperation Mechanism (LCM). The LCM provides a framework for the labour ministries of the two countries to work together in improving systems of administration and ensuring the enforcement of labour laws. Article 18.4 under the Labor Chapter of the FTA states that a contact point should be established that will serve as a contact point for the LCM. The labour ministries of both Parties are to carry out the work of the LCM. The activities of the LCM include the establishment of priorities for cooperation; the development and periodical review of a work programme for technical assistance in accord with the priorities set; the exchange of information on labour policies and the importance of observing and effectively applying labour law and practices in the territories of both Parties; the exchange of information on and the encouragement of the best labour practices and advance understanding of, respect for, and effective implementation of the ILO principles as stated in the Declaration; promotion of the collection and publication of comparative data on labour standards, labour market indicators, and activities on enforcement; arrangement for sessions periodically to review cooperate activities to be in a position to provide direction for future activities; and, finally, development of suggestions for each ministry for consideration.

7.4.5 Labour Provisions in the United States–Peru Trade and Promotion Agreement (U.S.–Peru FTA)

The U.S.–Peru Trade Promotion Agreement (TPA) was signed between the two countries on 12 April 2006. The agreement went into effect in February 2009. The TPA marks the first agreement signed under the deal struck between the U.S. Congress and the G.W. Bush administration—the “New Trade Policy for America”. Even though both are not each other’s major trading partners, trade between the U.S. and Peru constituted for both countries a strategic as well as an economic agreement. In the words of the former U.S. trade representative Rob Portman, “[a]n agreement with Peru is a key building block in our strategy to advance free trade within our hemisphere.” And the Peruvian President Alejandro Toledo also stated: “[w]e have reached an agreement where Peru came out the winner.”52

In 2007, Peruvian exports to the U.S. were 19 %, whilst U.S. exports to Peru were 17.7 % of total Peruvian imports. Whilst this constituted a trade imbalance for the U.S., in 2008 the U.S. exports to Peru resulted in a trade balance for the U.S. For the U.S., the TPA would ensure that eighty per cent of the exports of consumer and industrial goods to Peru and about two-thirds of U.S. farm exports to Peru will be duty free upon entry into force of the TPA. The TPA is comprehensive in that it covers all the areas of trade under the WTO agreement in addition to agreements on government procurement, competition policy, labour, environment, textiles, and apparel.

As with all other agreements entered into by the United States, with the exception of NAALC, the labour obligations of the TPA are included in the core text. Under the terms of the agreement, each party is required to adopt and maintain in its statutes and regulations the labour rights as stated in the ILO Declaration. The rights, as stated in the TPA, refer only to the ILO Declaration.53 This has been seen as controversial and has been criticised by labour groups that the TPA does not require Peru to comply with the other international standards as laid down by the ILO but only the core labour standards. Each party is required not to derogate from the agreement in a manner that would affect trade or investment between the parties.54

On the issue of enforcement, each party is expected not to fail to effectively enforce its labour laws in accordance with Article 17.2.1 (the ILO Declaration), in addition to the party’s own labour laws. This obligation is enforceable through the TPA dispute settlement procedures.55 The TPA also contains procedural guarantees that persons with legally recognised interest in a particular issue would have appropriate access to tribunals and that workers and employers also have a fair, equitable, and transparent access to labour tribunals. Each party is also requested to promote a public awareness programme of its domestic labour laws.56

The TPA calls for the establishment of a “Labor Affairs Council” at the cabinet level or equivalent representatives of the parties. The responsibilities of the Council are to “oversee the implementation of and review progress” of the labour section of the TPA. The Council is also to develop general guidelines for the parties’ consideration and resolution of issues.57 Any party can request consultations with the other party on labour issues by a written request to the contact point of the other party.58

The TPA has a section on labour cooperation and capacity-building mechanism. The aim of this is the pursuit of bilateral and regional activities on labour issues, which include the rights under the ILO Declaration, compliance with ILO Convention 182 on the elimination of the worst forms of child labour; labour administration to strengthen the institutional capacity of labour administrations and labour tribunals; establishment and strengthening of alternative labour dispute resolution mechanisms in resolving labour disputes; improvement of social dialogue among workers, employers, and governments; cooperation to improve occupational safety and ensure health compliance; mechanisms and best practice to protect and promote the rights of migrant workers; programmes for social assistance and training; development of programmes to promote new employment opportunities; and development of programmes on gender issues.59

The TPA has an extensive section on dispute settlement. Under the provisions of the dispute settlement procedures, should the parties fail to resolve an issue (which includes labour issues), with clear deadlines for resolution, any of the parties could then request in writing a meeting with the Commission (comprising of cabinet-level representatives). Should the Commission fail to resolve a matter, a party may request in writing the establishment of an arbitral panel. The TPA provides rules on the qualifications of panellists, panel selection, rules of procedure, third party participation, the role of experts, the initial report of the panel, the final report of the panel, how to implement the final report of the panel, and rules on non-implementation, which could lead to the suspension of benefits. Should the party complained against eliminate the nonconformity or the nullification or impairment found by the panel, the dispute settlement section provides for rules on review of parties compliance (Tables 7.2 and 7.3).

Table 7.3
Key labour aspects of U.S. Trade Agreements in all models

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NAFTA (1994)